Legislation passed by Parliament last night amended the Fair Work Act to give new powers to employers that are eligible for JobKeeper subsidies. The powers include the ability to direct employees to work reduced hours or days, undertake alternate duties and work at an alternate location.
The JobKeeper payment scheme is an economic subsidy recently introduced to assist businesses that are significantly impacted by COVID-19. The purpose of the scheme is to avoid mass lay-offs by subsidising wages for retained staff.
Eligible businesses that are experiencing significantly reduced turnover will be paid $1,500 per fortnight (pre-tax), per qualifying employee, for up to six months commencing on 1 May 2020 and backdated to 30 March 2020.
New powers for employers
On top of the financial assistance granted to employers, the Fair Work Act has been amended to include temporary powers for employers, which are designed to create flexibility and save jobs.
Pointon Partners has previously written about the existing power of employers in respect of stand down pursuant to s 524 of the Fair Work Act here.
The new amendments, which override any modern award, enterprise agreement or employment contract, allow employers to:
- direct employees to undertake alternate duties
- direct employees to work at an alternate location
- stand down an employee without pay (completely or partially) for any period in which they can’t be usefully employed
- request employees to take accrued annual leave
- reach agreement with employees that annual leave will be taken at half pay
Requirements before powers are exercised
Directions can only be given to an employee if the employee cannot be usefully engaged for their normal days or hours of work because of changes to the employer’s business which are attributable to COVID-19 pandemic (including any governmental initiatives to slow the transmission of the virus).
Employees must also be given at least 3 days’ written notice of proposed directions and be consulted before any directions are given. Any proposed directions should be reasonable and targeted towards continued employment.
If a direction is given to an employee, the employer must not unreasonably refuse a request by that employee to engage in reasonable secondary employment or for additional training or professional development. Employers could refuse an employee’s request to work for a competitor or where such work would lead to a disclosure for the employer’s confidential information.
All directions will cease to have effect from 12am on 28 September 2020 unless revoked or replaced prior to that date.
Impact on wage bills and entitlements
Employers can reduce their employees’ hours until their wages are equal to the $1,500 fortnightly JobKeeper payment, allowing employers to limit their wage bills. However, directions (including stand down notices) cannot reduce an employee’s base hourly rate of pay.
Employees subject to a direction from their employer will continue to accrue entitlements as if the direction had not been issued. Termination entitlements (e.g. redundancy pay and notice of termination or payment in lieu of notice) remain unchanged and will apply at an employee’s usual rate of pay.
Rights of review
Employers, employees and their representatives may raise disputes with the Fair Work Commission about stand downs and directions.
The Commission may deal with disputes in whatever way it sees fit, including by issuing binding directions following arbitration.
In dealing with a dispute, the Commission will consider fairness between the parties concerned.
Tax and superannuation
JobKeeper payments to employees are taxable and PAYG withholding obligations will apply. The $1500 payment is therefore before tax.
For payments made to cover an employee’s usual wages, superannuation is payable according to the ordinary rules for payments to employees for ordinary time earnings. For payments (or part-payments) to employees in excess of an employee’s usual wages, superannuation is not required to be paid.
JobKeeper payments must be made fortnightly, including additional wage payments on top of the subsidy. The ATO has been empowered to keep monitor this activity, and will be using Single Touch Payroll for this purpose.
Contraventions and penalties
Serious penalties may apply to employers who misuse the provisions. Employers that fail to pass on government payments to workers could be fined up to $126,000 and could also face civil penalties up to $126,000 if they “knowingly misuse” new powers granted to them under the new legislation.
These extraordinary measures follow recent amendments to the following modern awards:
- Clerks – Private Sector Award
- Hospitality Industry (General) Award
- Restaurant Industry Award
The amendments provided capacity for employers to direct employees to take annual leave, as well as measures to facilitate reductions in the working hours of full-time and part-time employees.
The Commission is also considering varying almost all modern awards to include an entitlement to two weeks’ unpaid “pandemic leave” and the capacity to take annual leave at half-pay.
Employers may need to exercise caution before issuing JobKeeper directions if there is any uncertainty that it will suffer the requisite 30% reduction in revenue. The ATO is working through the complexities faced by businesses in comparing current revenue with revenue in a prior period.
There are a number of issues that are expected to arise from the new legislative powers, including:
- allegations of discrimination between employees when issuing directions
- how reasonability and necessity are assessed by the Commission when reviewing directions
- whether directions remain in place when under review by the Commission
- what constitutes sufficient consultation prior to the issuing of directions
Pointon Partners will remain abreast of further developments and can assist with any employment-related queries.